Energy Fuels Inc. (EFR) Earnings Call Transcript & Summary

Thank you for standing by. At this time, I would like to welcome everyone to the Energy Fuels Inc. Australian Investor Day. [Operator Instructions] I would now like to turn the conference over to Ross Bhappu, President and CEO of Energy Fuels. The floor is yours.

Thank you, Justin, and thank you all for joining. I appreciate you taking the time to hear about Energy Fuels and learn a little bit more about our company. Again, my name is Ross Bhappu, I'm President and CEO of the company. Energy Fuels is a U.S.-based company. I live in the Denver, Colorado area, we're based here, but we are listed on the New York Stock Exchange, New York American -- sorry, the New York American Exchange, the Toronto Stock Exchange. And now with the addition of ASM were listed on the ASX, which is fantastic, under the ticker EF2. So I've had -- over the course of my career, I've had a lot of experience and a lot of -- spent a lot of time in Australia. It's certainly a tremendous country when it comes to mining. Early on in my career, I spent time at the Mount Isa smelter, the copper smelter, where I learned about copper smelting, I'm a metallurgist by background, learned that technology and then we use that ISASMELT technology here in the United States. And so my exposure and time with Australia has gone for many, many years. And so it's great to be on the phone with all of you. So Energy Fuels is a company that is growing. We've grown quite significantly over the last few years. It's a company that started out as a uranium company, and I'm going to walk you through a little bit about how we've advanced from uranium mining and processing through the rare earth and heavy mineral sands and today, we are really truly a global diversified and vertically integrated critical minerals company. So the first slide, of course, I've always got to go through -- sorry the second slide is always about the forward-looking statements and I will be making forward-looking statements. So please be aware of that. So if we go to the next slide, Energy Fuels started its life probably from 45 years ago. And as we kind of advance through this, the first set of inputs here will show you kind of where we started with uranium. And you can see all of these blue boxes represent our uranium assets. We have up here 7 different uranium mining assets. We're operating 2 of them. The key here is the White Mesa Mill, the yellow box in the middle. The White Mesa Mill really is the kind of the gem in the crown of Energy Fuels assets. It's the only licensed and permitted operating mill for treating conventional uranium ores in the United States today. We are currently the largest producer of uranium in the United States. We'll produce close to 2 million pounds this year. So by global standards, I would say they're not massive. We're not massive in uranium standards, but by U.S. standards, we are the largest and very significant. Probably about 6 years ago, we started experimenting with other things that we could do with that mill, and recognizing that all rare earth minerals have some level of radio activity with them, whether it's uranium or thorium. We started working in the laboratory first and experimenting with utilizing our solvent extraction experience to process uranium -- to process rare earth ores. That led us to building a pilot plant. And then 2 years ago, a little over 2 years ago now, we built a commercial operating facility to treat rare earth minerals. And specifically, we treat monazite and now also MREC materials. And once we discovered that, we've been purchasing monazite ore from -- monazite concentrates from Chemours in Florida and Georgia. But we also decided pretty early on that we wanted to be in the business of producing our own feedstock. And so we added a host of heavy mineral sands operations, and the first one would be -- let me try to get this. There we go. The first one would be the Bahia Project in Brazil. The second one is a joint venture with Astron for the Donald Project right in Australia. And the third one is the Vara Mada project, which is in Madagascar. So about 2 years ago, almost 2 years exactly, we acquired Base Resources was based out of Perth. Base Resources was operating and just at the tail end of operations of the Kwale project in Kenya. And so interestingly, the Base has gone through -- kind of going from feasibility study through construction, through operations for some 13-odd years, and now reclamation and closure. And so a fantastic experience. We've retained all of that experience, of course, in our Perth office and so today, we are advancing on the Vara Mada project. We have the Donald Product joint venture that we're hoping to be in a position to make an FID on as quickly as possible. More recently, probably in January of this year, we made an announcement that we were acquiring ASM, Australian Strategic Materials. And ASM has the Dubbo Project. So with that, we've acquired the Dubbo Project. in Australia, of course. And equally importantly, the Korean Metals Plant, which is a metallization facility. It's it takes oxides, rare earth oxide and converts them to metals and alloys. And as part of that, ASM and now ourselves have been planning on also replicating that plant in Korea and building a sister facility very similar to it here in the United States, and we're referring to it as the American Metals Plant. We're still working on the exact location. But on the back of announcing the ASM transaction, again, that goes back in January, we were contacted by all the major rare earth magnet manufacturers about providing and entering into either offtake agreements or joint ventures, partnerships. And so we started exploring opportunities with different manufacturers, and that led us to a company called Vacuumschmelze. Vacuumschmelze is a German-based company. They have operating assets in Hanau Germany. So that's just outside of Frankfurt. They have assets in Finland, Slovakia, Malaysia and China. But importantly, they've just completed construction on a beautiful new state-of-the-art facility in Sumter, South Carolina. And so with that facility, we have great capabilities in producing magnets. So you can see that column on the left side of the screen, we currently have the capacity to produce 3,500 tonnes per year of magnet production. Our mill capacity is 10,000 tonnes per year of monazite and that equates to about 1,000 tonnes per year of NdPr. And then we have, as I mentioned earlier, we produced about 2 million pounds of uranium annually. So with these assets and once we build out all of those different facilities, we have the ability to grow the magnet production from 3.5 to -- sorry, to 13,500 tonnes, so expanding it by 10,000 tonnes per year of magnet capacity. So it's really a tremendous capacity increase. And with that, we would expand the mill, that takes us to 60,000 tonnes per year of monazite and that equates to about 6,000 tonnes per year of NdPr. And then we also have the ability -- the mill is licensed and permitted to produce up to 6 million pounds per year -- sorry, it was designed for 6 million pounds per year, we licensed for 8 million pounds per year, and we could likely go to about 5 million pounds per year annually of U3O8 of yellowcake. So really, it provides a tremendously diversified portfolio of assets. And I'd just mention that, again, Australia has been vitally important over the years. the Vara Mada project is a very important part of our growth plan. ASM is very important. Our Donald joint venture. So to put it in perspective, over the last 2 years, we've invested in and committed over AUD 1 billion into Australia to acquire these assets or to build out projects. So Australia, again, is extremely important to our future. If we jump to the next slide, we really do believe we have this fully integrated rare earth mine to magnet platform, and we're a leading uranium producer. Of course, to get there, we also -- because we chose monazite and MREC, we've gotten into heavy mineral sands. So today, when you look at what is Energy Fuels, we're the #1 producer of uranium in the U.S., we're this expanding rare earth magnets and advanced materials company. We announced just about 3 weeks ago that we've started construction of a heavy circuit. So we are building the capabilities to produce terbium and dysprosium oxides, with the ASM acquisition, we can produce metals. So neodymium iron boron alloys and metals as well as samarium cobalt. And then with the addition of all the heavy mineral sands, we're also a major producer or will be a major producer of titanium and zirconium minerals. So really, it's very much a fully integrated platform and is quite diversified across all -- a number of critical minerals. I guess the one thing that I would say that everything that we're doing has in common. So when we look at uranium, rare earth, vanadium, titanium, zircon, it's all that these minerals contain radioactive elements. And so they contain uranium and that really gives us a tremendous competitive advantage when we're processing these minerals. So just if we look a little bit at the demand side of the equation on the next slide, we feel like when we look at our position, our strategic position, we think we can be -- and we are going to be the supplier of choice. We're a leading global player in this space. We've got tremendous scalability. We're going to have industry-leading returns. And when you look at the growth that we're seeing in this sector, data center is growing at almost 30% per year. Nuclear energy has been growing at around 4% per year. But when you look at the small modular reactors and the growth in nuclear power restarting things like Three Mile Island, and other nuclear facilities, we think it's going to grow at a higher rate than that. Of course, on the automotive side, with electric vehicles growing at almost 20%. We see a tremendous opportunity on the rare earth side, the uranium side, the titanium side. An area that's really exciting for us is robotics. We're looking at compound annual growth rates of over 50% on robots and especially humanoid robots, which are massive consumers of rare earth minerals. So we have a competitive advantage because of low-cost operations, the Vara Mada project tied with the White Mesa Mill will make us one of the lowest cost producers of rare earths in the world. And that includes our Chinese counterparties that we deal with and that would be our competitors. We have tremendous technical capabilities. We've got now this fully vertically integrated platform, mine to magnets. We've got very strong government support and we believe we've got very good sustainable solutions. So as we look at the next slide, the demand outside of China, I mean, I find this really interesting that the 2 bar charts on the right -- sorry, on the left show that, there's -- between 2025 and 2035, there's going to be a 50% increase outside of China for these magnets -- for magnet demand. And when we look at where that's going to come from, we need a 2x increase in the mining. We need a 4x increase in refining and separations, and we need to see a 6x increase in magnet production and we think we can be a very important part of building this out and being a part of the solution here. Importantly, we're going to see about $60 billion of investment over the course of the next 10 years to fill that need. So when we look at the next slide where Energy Fuels is, we feel like we're uniquely -- to be a fully vertically integrated producer. If we start from the left, we've got the mining operations, HMS mining projects as well as purchasing of MREC. So we've got the Donald Project that we hope begin to make an FID on very soon. We've got the Vara Mada project in Madagascar, which is -- we've got a feasibility study that we announced earlier this year and we're hoping to move that into construction as early as late next year. We've got the Bahia project, which is a little behind both of those. And then we've got our Chemours offtake agreements and then other monazite and MREC offtake agreements. And then, of course, the Dubbo Project, which now we've acquired through the ASM acquisition. So that's on the mining side. When you look at our processing and separation capability at the White Mesa Mill, we do have this capability today, again, about 10,000 tonnes of monazite capacity, and that allows us to produce oxides of NdPr, Dy, dysprosium, terbium, samarium, europium, and gadolinium either separated or individually as oxides, and then everything else including yttrium and other minerals and metals. So then with the addition of ASM, that gives us that metalization and alloying capability. That's the Korean Metals Plant and soon to be the American Metals Plant. And then with our announced acquisition of Vacuumschmelze, that will allow us to produce multiple grades of magnets including samarium cobalt and that's the operating facilities in Germany as well as the United States as well as Finland. So we have operations for all of them. And that gives us that full vertical integration to supply into the automotive industry, the robotics sector, of course, data centers and energy demand and then consumer goods. And I think people don't really realize that these magnets are prolific. They're used in everything from your iPhones, to your earbuds, to your electric vehicles, importantly, in defense applications with fighter jets, but also just commercial jetliners require a massive amount of these rare earth minerals. And so again, it gives us a tremendous capability. When we look on the next slide at the advancement where we are today. Today, we have the White Mesa Mill with the 10,000 tonnes per year capacity. We have our existing magnet facilities that we hope to close on later this year with Vacuumschmelze and that gives us the 3,500 tonnes of magnet production. We're hoping to move the Donald project, as I said before, into construction and operations. That will be sort of the first mine that we develop off the rank in terms of heavy mineral sands and monazite production. We have the ability then to expand and what we announced about, 2 or 3 weeks ago, we announced the expansion of the White Mesa Mill to include heavy separation, which is dysprosium, terbium, samarium, europium and gadolinium and that will be operational by late next year. We hope to have the Donald Project up and running by 2028. We have announced earlier this year a feasibility study for the Phase II expansion of the White Mesa Mill. That's what I mentioned earlier that would give us the 6,000 tonnes per year of NdPr capacity. And then around the same time, 2029 or 2030 we're hoping to have the Vara Mada project up and running, supplying monazite feed to the White Mesa Mill. And then, of course, on the mining side, we have the Bahia project. We have the ability to expand Donald and we have the ability to expand Vara Mada. So you can see that on the mining side, we have a number of projects coming on the milling side, at the end of Phase II, we'll have complete capacity and facilities to process all of that monazite ore. And then with the Vacuumschmelze acquisition, somewhere the Sumter plant in South Carolina was designed for expansion. It's a beautiful new state-of-the-art facility and can expand in multiples of 4,000 tonnes per year. So we can take it up to 12,000 tonnes per year total. So quite aggressive, but not reckless as my predecessor, Mark Chalmers would say, in our growth plans, and we're quite excited about the opportunity we have there. So on the next slide, I think the question people ask is, well, are you funded for all this? And we have -- we're in a great position. We have about $1 billion in liquidity today. Most of it sits in T-bills here in the U.S. Our near-term growth CapEx requirements are going to be between USD 400 million and USD 450 million. And those are to build out the Donald Project, to expand the White Mesa Mill, and to build the American Metals Plant, the replication of what we have in Korea. And so we have government funding that has been announced of roughly $300 million for those projects, and that comes from EFA, from OSC, which is the U.S. Office of Strategic Capital, and that's via loans and grants. And so that requires about $100 million to $150 million of additional equity from Energy Fuels. More medium term, we have needs for, again, the Phase II expansion of the White Mesa Mill, which is the one that takes us to 6,000 tonnes of NdPr, the Vara Mada project, the Bahia project and then the expansion of Donald and that would require between $1.7 billion and $1.8 billion. And we again have government funding sources that we are in discussion with for part of that, which is committed, part of that is still yet to come of between $1.3 billion and $1.4 billion. So that requires an additional equity requirement of $400 to $500 million. So very achievable. We have -- in addition to this, we have the closing of Vacuumschmelze, which we hope will occur later this year or early next year and that's a $700 million cash payment as well as some shares being issued. So if we just go to the next slide, when we look at have sort of the fit and it kind of comes back to why did we choose Vacuumschmelze over any of the other magnet manufacturers? And it was because if you look at the left-hand side of this page, between the White Mesa Mill Phase I, so where we are today with 10,000 tonnes of monazite producing 1,000 tonnes of NdPr, we can produce 15 tonnes per year of Tb of -- terbium and another 50 tonnes per year of dysprosium. That fits almost perfectly with where Vacuumschmelze is today with their current capacity of 3,500 tonnes per year of magnets. Keeping in mind that a magnet contains about 30% rare earth, the other -- the balance of 65% to 70% of a magnet contains iron and boron. So the 1,500 tonnes or the 1,000 tonnes per year of NdPr equates to about 3,500 tonnes per year of magnet block. More long term when we look at the growth plans, and we add the Donald Phase II at full capacity, we add the Vara Mada project and Bahia, that then gets us to 6,000 tonnes NdPr. And that again equates very nicely to the Sumter expansion to the expansion of the VAC facilities and that gets us to 13,500 tonnes per year of magnets. From our own supply, that would leave about 2,000 tonnes per year for either future expansion or sales to third parties. So again, the VAC acquisition was just a great fit. And I might just talk very briefly about that on the next slide. It's a tremendous leader in magnets. Vacuumschmelze has been around for over 100 years. They've been producing rare earth permanent magnets for the last 40 years. They -- to give you a sense, they've produced over 1 billion magnets in the last 10 years. And let me repeat that, they produced 1 billion magnets in the last 10 years. So tremendous capability. Today, they have about 1,000 customers. They produce about 2,000 different products and they are applied across all sorts of uses, like again, from smartphone applications to electric vehicles to defense contractors in jet airplanes, you name it, pretty much everything that has an electric motor, they would be able to produce or they are producing materials for it. So VAC is a fabulous company and a clear leader in this space. So on the next slide, I want to show just a little bit of how we approach this vertical integration. We chose to do it, number one, by some acquisitions. So on the mining side, we acquired Base Resources. We're partnering up and building the Donald Project with an Astron joint venture. We're going to build the Vara Mada Project, and we have that capability in-house. On the separation side, the White Mesa Mill, we have tremendous capabilities for chemical extraction for chemical engineering. And so we've developed both NdPr and dysprosium and terbium separation, which we've announced publicly the production of both of those and we're building out the facility for that. On the metals and alloy side, we looked around and that's a real pinch point in the industry, and we chose to go into metals and alloys via the acquisition of ASM. ASM is a tremendously successful company in terms of producing these metals and alloys, the facilities in South Korea, they can do rare earth metals as well as strip casting and producing the alloys. And again, we chose to acquire that technology. And then finally, on the magnet side, both on blocks and finished magnets, again, we chose to grow into that space by acquiring Vacuumschmelze, the leading company in the Western world for producing those magnets outside of Asia. And so we chose to do this vertical integration through a combination of internal growth as well as acquisitions. When I look at Lynas, Lynas took a different approach. They chose to go through separations and then partnered up with Shin-Etsu and other companies to produce the metals alloys and magnets. And that's a perfectly fine strategy. But again, we chose to go a different route. MP Materials, again, they chose a different route. They're trying to do this organically. They're building up their own metal making and magnet manufacturing facilities. The thing I would say is if you ever had a chance to visit either the Hanau plant outside of Frankfurt, that VAC has or the Sumter facility, you'd realize that these are very highly technical projects to build customer reliance or customer -- what do you call it, where they've approved -- basically qualified -- sorry, qualified your product, it takes a long time to build that capability and again, we chose to go at a different route. And then finally, USA Rare Earth, they purchased the old Hitachi facility and they're trying to grow it themselves. We chose, again, to do it a different way. And none of them are right or wrong, but we certainly like the path that we're going. I might just finish off here by talking about uranium. And on the next slide, we just show the supply and demand balances of uranium. Again, we're really excited about the future of uranium. It kind of get lost in everything we're doing on rare earths, but we are, again, the largest producer of uranium, and uranium will continue to be a very important part of our equation. And you can see as we pull out to 2030s and 2040s, the supply-demand imbalance is really incredibly noticeable on that chart. And we very much intend to be a part of that. And if you look at the next slide, we have very high-grade mining operations. We're mining in Northern Arizona and Utah, but we have operations in New Mexico and Wyoming as well as Colorado. So we're scaling from 2 million pounds per year currently and potentially scaling that up. The White Mesa Mill in the first half of this year produced 1.5 million tonnes. Now the mill is larger than the mines can produce. So we campaign the mill and we ran it for the first 6 months of this year. The mill is currently shut down, while we're building stockpiles of ore to feed later in the year. And then we have growing sales and revenue coming from a combination of long-term offtake agreements with major utilities as well as opportunistic spot sales. So again, uranium is a massively important part of our business and will continue to be. So just in conclusion on the final slide, I just want to say that we have a well-established business vertically integrated to underpin our growth going forward. We're building a very much a derisked differentiated critical minerals platform. We're doing it differently than others. We feel like we have a very unique processing and integration capability with the White Mesa Mill, and our acquisitions of Base Resources, ASM and VAC. And then we feel it's very important to be able to capture margin across all aspects of the -- across the supply chain. And so we're creating value across the entire chain. And then finally, we feel like we're positioned for long-term secular growth in the space that we're operating in. So we really do feel that we are empowering the world's most strategic technologies as a global diversified vertically integrated critical minerals companies. So that is the conclusion of my presentation. And it's a little awkward to just be on this video without any -- a video of me or a view. So we're happy to take questions. Justin earlier gave you a phone number to dial in to. And I don't know if we have questions, but Justin or Tim, let me know if there are some questions out there.

There are no questions from the phone line at this time. I would like to turn the conference back over to Ross Bhappu, President and CEO of Energy Fuels, for any further remarks.

Well, thank you. I appreciate that. I'm going to be in Australia next week. I've got a series of meetings that have been set up on Monday and Tuesday in Sydney and Wednesday in Melbourne. I'm really looking forward to being there. Again, I have a strong affinity and a strong -- a long history of spending time in Australia. I always enjoy being there. And I look forward to hopefully meeting some of you in person and answering any questions you might have at that time. So with that, I'm going to close, and just say, thank you very much for participating.

This concludes today's call. Thank you for attending. You may now disconnect and have a wonderful rest of your day.